Online marketplace Snapdeal is in talks with US online payment system PayPal to sell Freecharge, three people with knowledge of the development told ET.

The deal would value the online recharge company at around $500 million, they said, compared with the $400 million that Snapdeal paid for it in 2015.

"This will free up to a great deal Snapdeal’s desperate need for funds at a time when investors are not willing to put money into its business," one of people said.

Snapdeal’s parent Jasper Infotech has been in negotiations for over 18 months with multiple investors – strategic and financial –to raise $150-300 million in fresh capital for its digital payments platform. However, the company is yet to close the round.

Snapdeal has also seen an exodus of senior executives in the past two months, the latest being the exit of Freecharge chief executive Govind Rajan. Funding failures and the decision to sell Freecharge to PayPal are said to be among the reasons that led to Rajan’s exit.

Snapdeal has also seen an exodus of senior executives in the past two months, the latest being the exit of Freecharge chief executive Govind Rajan. Funding failures and the decision to sell Freecharge to PayPal are said to be among the reasons that led to Rajan’s exit.

A Snapdeal spokesperson said in an email: "We deny all such speculations." Paypal and Freecharge also declined to comment on the matter, dismissing it as speculation.

Late last year, Freecharge had denied reports PayPal would buy a 25 per cent stake for $200 million.

About a week ago, Snapdeal laid off hundreds of employees as the company seeks to turn around its fortunes after a dismal 12 months. In an earlier interview with Reuters, Snapdeal chief executive Kunal Bahl had said he expected the company to become profitable in the next two years.

A deal will help PayPal strengthen its India presence. In an interview to ETtech in February, Paypal India managing director Anupam Pahuja had said: "We want to play a big role in the digital payments space in India. We want to democratise access to the financial system through our products. There will come a day when cash will be an outdated concept and we feel we are best positioned to attack all pieces of the pipeline."

PayPal has about 192 million customers in more than 200 markets across the world. Though it has no domestic product in India, local merchants can sell overseas through PayPal.

Outside of San Jose, the company’s biggest tech workforce is in India with a combined strength of 1,300 employees in Bengaluru and Chennai.